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Turkey’s Economic Crisis and its Dispute with the US

It all begun last month when tensions between the US and Turkey due to a disagreement over the fate of North Carolina Pastor Andrew Brunson. Turkey imprisoned Brunson in October 2016, claiming he had ties to a group that Erdogan blames for the failed coup earlier that year. When Turkey failed to release Brunson in July, the Trump administration sanctioned two top officials in the Turkish government. The dispute between the two NATO allies continued with both sides threatening each other with imposing sanctions on one another. Turkey vowed it would not succumb to threats. This indeed led to further escalations earlier last week as the US doubled its tariffs on metal imports from Turkey. This worsened the economic crisis for Turkey’s currency, the lira, which has lost about a third of its value against the dollar since January. Nonetheless, the court refused to release Mr Brunson, and the government in Ankara increased tariffs on imports from the US of cars, alcoholic drinks and leaf tobacco. While this managed to recover the value of the lira slightly, a fresh tweet from President Trump fuelled the dispute as he accused Turkey of had “taking advantage of the United States for many years” and that he was “cutting back on Turkey”. Last Thursday, US Treasury Secretary Steven Mnuchin said: “We have more that we are planning to do if they don’t release him [Mr Brunson] quickly.”

Mr Brunson has denied charges of espionage, but faces up to 35 years in jail if found guilty. The US insists the pastor, a long-time Turkish resident, is “a victim of unfair and unjust detention”. President Recep Tayyip Erdogan accused Washington of showing an “evangelist, Zionist mentality”. The standoff appears to be one of the most serious crises between Turkey and the United States in modern history, along with the rows over the 1974 Turkish invasion of Cyprus and the 2003 US-led invasion of Iraq. While the diplomatic crisis deepens, the lira is still going into meltdown and continues to fall again this week. This turmoil has prompted widespread selling in other emerging markets, sparking fears of a global crisis. Nevertheless, Turkish President Recep Tayyip Erdogan vowed his country will not be brought to heel amid an ongoing diplomatic crisis with the United States. Without naming the US directly, the Turkish leader on Monday said that there was no difference between attacks on the country’s economy and attacks on “our call to prayer and our flag”. In his speech, Erdogan denounced Washington for declaring “economic war on the entire world” and holding countries “for ransom through sanction threats”. However, he urged Turks to shore up the currency by not trading in dollars and euros. The central bank also said it would provide all the liquidity Turkish banks needed, as it seeks to keep money flowing in the financial system.

Yesterday morning, the US Washington rejected an attempt by President Erdogan to solve the worsening crisis in Turkey’s relations with the United States by linking the fate of an American pastor to a Turkish bank accused of sanctions-busting. More specifically, Ankara offered to release Andrew Brunson, an evangelical preacher who was detained by the Turkish authorities and accused of links to the 2016 coup attempt, in return for relief for Halkbank, a majority state-owned bank, according to reports from Washington. The bank is facing billions of dollars in US fines over accusations that it masterminded the purchase of gold to pay for oil imports from Iran into Turkey. However, the US officials have rejected a deal, saying that Mr Brunson must be released before other issues can be discussed.

As the diplomatic deterioration continues, and the economic crisis deepens, speculation is rife that Germany could be ready to offer Turkey financial aid when President Recep Erdogan visits the country next month, but analysts say it’s unlikely that Ankara would ask for help. Moscow is also expected to stand by Turkey if the crisis continues. Russia’s Foreign Minister Sergei Lavrov, visited Ankara on Tuesday, branding the US sanctions an illegitimate policy. Reports amid all speculations, state as the financial situation due to the sanctions has left citizens with little or no option than to advance towards the cryptocurrency to survive.

Whilst the entire world watches the two NATO allies continuously failing to end this dispute, an announcement by Russia could spark greater renewed tensions and even sanctions as analysts fear. Yesterday, Russia’s state arms exporter, Rosoboronexport, says it will begin delivering its advanced S-400 antiaircraft missile systems to Turkey in 2019. Washington has voiced concern over NATO-member Turkey’s purchase of Russian-made S-400 missiles, arguing that its deployment could risk the security of several U.S-made weapons that Ankara uses. U.S. lawmakers have been working to block the delivery in response to the American pastor’s arrest and Turkey’s pledge to buy Russian S-400 missile systems.